Seeing Rosso: the economic and social impact of changing Rosso di Montalcino

I am seeing the news coming in from the Brunello Consorzio and it is exasperating! Why this constant push by the Consorzio to change the Rosso di Montalcino blend when most producers have clearly said no. Why is the decision that was scuppered in February back on the agenda in the first weeks of September, during vintage?

When the Brunello Consorzio reconvene again, during stressful vintage time (Sept 7), they will be there to talk about changing the laws for Rosso di Montalcino to include international varieties.

Why change a clear and unique product, from one tiny town in Tuscany, to make it more generic?

What is tabled by the Consorzio are two or three different versions of Rosso di Montalcino which will all have different names: Rosso di Montalcino, Rosso di Montalcino Sangiovese and Rosso di Montalcino Sangiovese Superiore. In other words, there is a move towards segmentation in this one little wine, which in layman’s terms, is a baby Brunello.

From a non-technical, wine lovers point of view, it is a very obvious change from what is a wine from Montalcino in Tuscany, Italy (let’s get down to brass tacks, because this wine is sitting on the shelf against many countries and styles of wine). It is easy to learn 100% Sangiovese is Montalcino. It is a clear beacon in Tuscany, and as an outsider, it makes sense and is easy to understand. It also speaks of the expression of the people and land. I could not put the position of the winelover better than The President of Brunello producer, Mastrojanni, Francesco Illy (of Illy Coffee) who has stated:

people consume stories of men of courage, territory, culture and passion. They search for features, specificity and personality. And who does not understand this … is designed to disperse his voice in a chorus of platitudes in which anyone can sing. Is this what we want? As we once lost our identity, to compete with this type of farming? And with that kind of laws on wine? Our identity is our first capital and it makes us different and gives us stories to tell different from anyone who does not have intensive viticulture.

So what are the benefits of “segmenting” Rosso di Montalcino?

In effect, it segments the market for the wine. Before you think I am a hard-headed capitalist and betraying my winelover roots, let’s try to understand the position of the Consorzio (because it must have an economic reason behind it, it is obviously not about keeping the integrity of the 100% Sangiovese wine).

In basic economic terms: by segmenting market you make more money. In theory, by splitting up Rosso di Montalcino into three groups there are now three new markets.

Let’s use an example of segmentation from another industry. The airlines segment the seats on the plane to increase profit. Once one class/type of customer/one price level has been exhausted the airlines segment the prices to encourage a new customer in a different class. This creates “endless” markets based on diversification.

Another example. If everybody buys a Ferrari – and there is a small group who can afford to buy a Ferrari at full price – if Ferrari lowers the price or have spin-offs of the Ferrari brand, there may make less money but Ferrari will get the money. (As an aside, will this cheapen the Ferrari name? I have not talked about the value-added by branding here)

The key question for Montalcio producers, and always discussed before segmenting a market: have you fulfilled the potential of the market right now? Is the current market truly exhausted?

If a winery produces 10,000 bottles and all are sold at full price there is no point to have segmentation. Segmentation reduces the intial prices.

If a winery sells 10,000 and has an extra ability to produce another 10,000 at no extra cost then it may be worth segmenting the market even if it is a lower price. For the producer who sells all bottles at full price, there is no point to sell at a lower price. There is no excess production to be sold.

You can see how this benefits the big producer over the smaller producer where we are often talking about 1,500 bottles not thousands or millions.

If the main market’s demand is exhausted and there are no more buyers then the winery must look at new markets. Have all the markets been explored and exhausted?

Can Montalcino supply all the demand in a new market such as China at full price?

If no, then there is no reason to blend it. You will find people to buy it at full price, especially if the “brand Montalcino” is clear and obvious.

If Rosso is segmented into different levels of Rosso di Montalcino, then it will not all be sold at full price. This is particularly important if you are small producer – which is the majority of producers in this one small town of Montalcino – who may not be able to have the stock to segment at different price levels.

The bigger producers, who have excess bottles, need to look at new markets. They can afford to lower the prices because they have an economy of scale. It is easy to diversify if you have an excess of wine.

What is the implication of this?

This will have the effect of pushing the prices lower for everyone, partly due to denigrating the brand, partly due to reducing prices when products are segmented. For a small winery who has sold 10,000 bottles anyway then they will have their “full price” prices pushed lower and reduced margins…

This has the risk of putting a few small producers out of business. In the worst case scenario, what will happen in 20 years time? Producers will go out of business making the land available to bigger producers who can snap the vineyards up at cheap prices, because small producers were forced out by a model that was unsustainable for them.

On the outside, being able to blend 1-5% of another grape into Rosso di Montalcino may seem like it will make a minor difference to the wine.

Social Impact

Apart from the fact, to quote Ziliani – this may be a Trojan horse to change Brunello blends to make them more international – this has social consequences for the town of Montalcino.

For wine is the expression of the land AND the people. When Montalcino is owned by two or three big companies and the artisanal producers are pushed out by economies of scale, then maybe the smaller issue of these new blends should not have been decided during the first weeks of vintage when everybody is nervous about 2011 vintage.

In retrospect, as they say in Italian, “chiaro anche ai sassi” – it will be clear to the rocks.

28 Responses to Seeing Rosso: the economic and social impact of changing Rosso di Montalcino

Oh Dear. Once it happens with Rosso, Brunello will follow, since that is the one they want – much higher prices to be had.

Rosso di Montalcino Sangiovese and Sangiovese Superiore? I suspect that the minimum requirements for Superiore will be exceeded by almost all ‘basic’ Sangiovese anyway.

As for the addition of a 3rd category to allow ‘international’ varieties, I am pretty sure that they do not need to create one. IGT was established precicely for this sort of thing. They already have a category for this wine that they are proposing, but for some reason want to create a second version of this category when IGT would cover it like a bedspread. Oh, hang on, IGT doesn’t contain the magic word ‘Montalcino’. Sorry, my mistake…

One of the key aspects of market segmentation is knowing your market. The airlines actually segment by time of purchase (Business people pay another price because they buy when less seats are available; Grandma gets a lower price because she buys when few seats have been allocated. It is not clear to me that the Brunello producers know their markets well enough to implement sophisticated market segmentation schemes. To me this is a hybrid of potentially being able to charge more for a Superiore wine and finding a place to stash the Merlot that grows in Montalcino. In either case, I think it is a plan that will run up against the law of unintended consequences

Thanks, great point.
I am pretty sure Brunello producers do not know their market as well as airlines, but what I do think about market segmentation is that there will be different prices for different wines, such as Superiore, which will help move excess wine but may put downward pressure on smaller wineries who are remaining 100% Sangiovese. I wish I did know the real economic reason why this is considered a good idea by the Consorzio – because they are not giving producers even the option to keep the status quo. In lieu of a reason, this is just one hypothesis, and I agree with you, either way I think “will run up against the law of unintended consequences.”

I read on the Polishwineguide.com: “The Brunellogate affair is now officially over, but tensions continue (including a recent – rejected – attempt at modifying the rules of Montalcino’s less expensive wine, Rosso di Montalcino, to allow other grapes than Sangiovese)”. It’s true. On the next 7 september will be another assembly of producers. As on the Vinoalvino.org (Franco Ziliani’s blog) and Dobianchi.com (Jeremy Parzen’s blog), I also ask You what You think about an other new possible Rosso di Montalcino DOCG Superiore (with Sangiovese 100% and other requirements in the vineyard and winery) – my proposal – to incrise the unique character of Rosso di Montalcino, as other Consortium did for Aglianico del Vulture Superiore, Asolo Prosecco Superiore, Barbera d’Asti Superiore, Barbera del Monferrato Superiore, Bardolino Superiore, Cesanese del Piglio Superiore, Conegliano valdobbiadene Prosecco Superiore, Dolcetto di Dogliani Superiore, Dolcetto di Ovada Superiore, Soave Superiore, Valdobbiadene Superiore di Cartizze, Valtellina Superiore, Vermentino di Gallura Superiore and so on in Italy. Practically to emptied the DOC Rosso di Montalcino (always under discussion) from the best wine, that could after accommodate changes of grapes composition in the DOC. In all italian DOC the generic name ”rosso” specify a blend of two or many grapes. Only in Montalcino generic name want be accurately: this is not clarity…

I would like to see Rosso di Montalcino increase its unique character rather than become more generic. If there is so much excess wine, what about declassifying the Brunello and creating a loss-leading, excellent value Rosso di Montalcino.

This is what Penfold’s do with Jacobs Creek (their cheaper wine) – put some of their best quality grapes in it so that it becomes extremely competitive at the price. Imagine if you bought a Rosso and it was a declassified Brunello? A very attractive proposition without the need to make it become very confusing for the customer with 3 different names.

I wrote on the Franco’s blog that I will not express still my opinion on two posts dedicated to the letter of Nicolas. I appreciate the letter of Nicolas, but at the same time condemn his call to vote “NO” and the Ziliani’s appeal to send You an email to adhesion. To me it’s completely right to express their evaluations, also welcomed the foreign guests (I encouraged some of they to write their comment), but this atmosphere of NO or YES, to divide us into good children and bad children as in asylum, it’s nonsense. I had a long correspondence with a well-known producer of Brunello, very pleasant and fruitful (as I hope); we have not concealed anything as true friends, but I do not allow its publication until voting took place and validated in order not to put now my finger in an open wound.

As well written Nelle Nuvole on Ziliani’s blog, “In pending further information, developments, messages and anything else excited I would reiterate that the greatest risk, even more dangerous to change the specification pr Rosso di Montalcino is to create a rift among the various producers . So to make them more vulnerable, insecure, fearful of the future. And have them continue to fight among themselves, instead of finding a system of union that would strengthen the importance of Montalcino wines, made with Sangiovese grapes from the hills of Montalcino “. This is the problem.

On must come to an agreement and I have proposed the following position, which is mine and I hope tey are considering.

Rosso di Montalcino must be DOCG Superiore and not stay two or three variants of the DOC as Rivella’s proposal.
My proposal is this: extract a Rosso di Montalcino DOCG Superiore from DOC Rosso di Montalcino, and this DOC will be emptied. It does not seem quite complicated, since it was adopted by Superior Aglianico del Vulture, Asolo Prosecco Superiore, Barbera d’Asti Superiore Barbera del Monferrato Superiore, Bardolino Superiore, Superiore Cesanese Piglio, Conegliano Valdobbiadene Prosecco Superiore, Dolcetto di Dogliani Higher Dolcetto di Ovada Superior, Soave Superiore, Superiore di Valdobbiadene Cartizze, Valtellina Superiore, Vermentino di Gallura Superiore and in all Italy, not only in Tuscany. It was “complicated” for they? No. Why must be complicated to Montalcino?

With this new DOCG would be more out specific areas of production, minimum number of plants per hectare, the form of new plant breeding, training system still permitted to existing plants, type of pruning of buds per hectare, maximum yield of grapes per hectare in specialized cultivation, consent to any emergency irrigation, winemaking and bottling site, maximum yield of grapes into wine, prohibition of practice of forcing, threshold increased alcohol content, standards for labeling. Exactly what was done in all other DOCG extracted from a previous DOC on the whole Italian territory.

As in those cases, moreover, even the DOC “Rosso di Montalcino” current may remain in force and therefore be deprived of the single variety (of which just only 100% Sangiovese would be included into the “Rosso di Montalcino DOCG Superiore”) and therefore would be suitable to all other types of reds that are currently included in Sant’Antimo DOC (and just extract all with the same writing, without changing a comma, only the name). The DOC Sant’Antimo then remain only for white wines and vin santo. Rivella could be content, calm down, the Banfi could sign an arbitration award in which undertakes to stop pestering (because it is quite isolated), or another election of new President and I hope that he will be a negotiator capable, out of all the parties perennial contention.

However, I do not like the proposal Rivella absolutely diction: why should it be found an inscription, a symbol, to be affixed on the label for the wine of those intending to make pure? Is not they who have to change a damn thing, if anything are those that add other varieties that should declare, such as writing, how, in what percentages, and undergo the same rules of control which is subject Brunello di Montalcino, including analysis of DNA, to verify that the addition is only one authorized, permitted, and the exact percentage is not exceeded. Furthermore, it should finally fix the downstream controls, those that allow self-control, directly between producers. This fact should have the right to buy bottles of wine on the market which they consider suspicious, analyze them, and transmit information to the Consortium. So even most of the allegations, winks, gossip about the wines of his colleagues are uniformly scaled. “

Juel, I’m really happy to read this post of yours. At a time of aggressive campaigning against the proposed changes in Rosso, at least you took the effort of looking into the matter indepth. There is a real structural reason behind these changes – the 700 hectares of non-Sangiovese that have been planted in the 1990s and 2000s – and honestly I don’t think allowing a 5% ingredient in Rosso is going to destroy the latter’s character. It could well open new markets, notably by bringing prices down for a segment of Rosso. (Poggio di Sotto will continue to sell their Rosso at 40 EUR and people will continue to enjoy it as an expression of real of Sangiovese).
The other thing is that the war needs to end. There are some large producers with their interests in Montalcino, and smaller traditional producers should offer some will to compromise. Otherwise I don’t see the situation improving.
I’ve voiced my concerns in this blog post: http://blog.polishwineguide.com/2011/08/31/montalcino-still-at-war/.

Thank you Wojciech for your comments. I enjoyed your post and understand your position having tasted with you the Rosso di Montalcino at the anteprima in Montalcino earlier this year.

There was definitely a lack of consistency in the style at the anteprima, but I am not sure whether this is because it is due to a a lack of international varieties to blend with Sangiovese, or because Rosso di Montalcino is made as an afterthought to Brunello rather than a wine focused on a market.

There are many ways to increase profit – what you suggest is you will open new markets if the price is lower, which I ask, why lower the price for new markets? I do not necessarily believe lower price is the answer to new markets – I suggest clear branding is more important. Which this proposal helps in no way.

Why not retain authenticity in the long run and remain 100% Sangiovese – and moreover – increase quality and credibility by giving the Rosso more than just an after-thought? There is always IGT and Sant’Antimo if they want to blend – but they have not exactly been successful. So, again, I ask – why? Why fiddle out about with the denomination at all? This is the question I have attempted to understand in this post.

Ciao Mario, thank you for your comments. I am having trouble following the argument of your comments in english but can understand the italian, if you would like to post in italian that would be helpful – I would like to understand your position better.

Brunello and Rosso with 100% Sangiovese are insuperable, both must be DOCG to increase quality and credibility. DOCG can specificy areas of production, minimum number of plants per hectare, the form of new vineyards, cultivation system permitted to existing vineyards, density vines per hectare, maximum of buds per vine in specialized cultivation, consent to emergency irrigation, winemaking and bottling in site, standards for labeling and so on. Exactly the same is done in all other DOCG with specification Superiore.
Devo scriverlo in Italiano o si capisce?

In a world making more and more blends from international varieties, which seem harder and harder to distinguish between, it is of great importance to maintain as much as possible varietal terroir based wines. Planting of international varieties, which are much often easier to grow and handle, in areas which were formerly planted with indigenous varieties, in the end can and will reduce the quantity of varietals and clones in the world, and some may be lost forever. In my opinion, the wine production rules of Montalcino, which is still an isolated island in the sea of worldly wines, should remain unchanged.

In an article posted this morning at jancisrobinson.com, Francesco Marone Cinzano of Col d’Orcia, Montalcino, alludes to the political machinations that appear determined to push through a vote tomorrow.

The articles I have read to date; Decanter.com, jancisrobinson and others some blogs. There has, however, been little in the way of an open examination of the political side, which one imagines, rather than sound argumentation, is the arena where decisions are likely to be won or lost

I wondered if anyone might have any further insights or opinions as to this and, perhaps therefore, which way tomorrow’s vote is likely to go.